What is the Maximum the IRS Will Let You Contribute to a 401k in 2011?

When contributing to your retirement account, the Internal Revenue Service (IRS) sets a maximum amount you can contribute each year. The maximum the IRS will let you contribute to a 401k plan in 2011 remains the same as it was in 2010.

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If you have a 401k plan with your employer, you are set to start putting away money for your retirement. You are able to contribute to your account, and in some situations, your employer even matches the amount you contribute, up to a limit. In addition, Uncle Sam sets the maximum the IRS will let you contribute to a 401k plan in 2011.

One consideration for the maximum the IRS will let you contribute to a 401k plan is the type of 401k plan that you have. If you have a traditional or safe harbor 401k plan, then your limitation is set at one level. If you have a SIMPLE 401k plan, then your limitations are set at a lower level. For either type of account, the maximum contribution amount for 2010 is the same maximum the IRS will let you contribute to a 401k plan in 2011.

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Traditional or Safe Harbor 401k Plan

If you have a traditional or safe harbor 401k plan, then the maximum contribution amount for 2011 is $16,500. This is the same limitation set for 2010. The IRS also allows those who are nearing retirement, at age 50 or older who have not saved enough in retirement to make what are called “catch-up contributions.” In 2010 and 2011, these maximum contribution amounts are also the same. In addition to the annual contributions of $16,500, individuals who are 50 years or older can contribute an additional $5,500 to their 401k in 2011.

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SIMPLE 401k Plan

When you have a SIMPLE 401k, your contribution limitations per year are slightly less. In 2010 and 2011, the maximum amount remained the same at $11,500. In addition to the maximum contribution amount, if you are 50 years or older and want to make additional contributions, you can make catch-up contributions. Above $11,500, you can make catch-up contributions that total $2,500 for the year.

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These contribution amounts are your maximum amounts. The caps do not include the contributions that your employer is able to make to the account. Employers have their own guidelines that are set by the IRS. Typically, employers do not match catch-up contributions into a 401k plan.

If you have a 401k plan with your employer, you are in a position that allows you to save for your retirement in a tax-deferred manner. The sooner you are able to start saving for retirement, the better off you are in ensuring that you have saved and grown your money enough to live out your retirement years. While the maximum the IRS will let you contribute to a 401k in 2011, and the future is capped each year, it is typically enough to get you to your goal. In special circumstances, when you are above the age of 50, the IRS gives you some leeway in contribution amounts so that you can grow your account in time for your retirement.